The Courier & Advertiser (Perth and Perthshire Edition)
Antrim sells interests to First Oil
CANADIAN OIL and gas explorerAntrim Energy yesterday revealed it had agreed a £30 million deal to sell the bulk of its interests in UK waters to north-east firm First Oil.
The company, which warned in November that it faced “significant doubts” over its future, said it would use the proceeds of the sale to settle its bank obligations following a string of production issues at the problem-hit Causeway field east of Shetland.
It admitted that the costs of developing the fully-appraised, 2.5m barrel reserve had simply proven too great amid shutdowns and other technical issues.
But the deal will allow Antrim to retain its 100% interest in the Fyne field, where proven and probable reserves stretch to an estimated 11.8m barrels and a final development plan has been submitted to the UK Government, and a 50% stake in prospects at neighbouring Erne.
It will also hold on to a 25% stake in the 1,006 sq km Skellig block, part of the Porcupine Basin off the south-west coast of Ireland.
A special meeting of shareholders will now be convened to approve the sale, which is expected to leave the company debt-free and with up to £10m in working capital.
Investors reacted positively to the news, with stock in Antrim closing the day up 15% at 4.75p.
“The board of directors’ recommendation follows an extensive process by the company to secure additional viable financing needed to meet higher than expected capital costs to complete the Causeway development as well as meet its ongoing Payment and Oil Swap obligations with Credit Suisse,” Antrim said. “This process was hindered by production interruptions caused by platform shutdowns and ongoing delays in completion of the Causeway electric submersible pump (ESP) and water injection facilities.
“These delays fur ther negatively impacted available cash balances as hedged production volumes under the oil swap no longer matched production volumes.
“While ESP and water injection facilities are now expected to be operational by early Q2 2014, the operator has incurred further costs at Causeway and the company has ongoing debt financing and oil swap obligations, which if not funded, could have resulted in the loss of the asset.”
Aberdeen-headquartered First Oil, the UK’s largest privately-owned oil and gas firm, will take on Antrim’s 35.5% stake at Causeway, where Ithaca is a major partner, as well as an additional interest in TAQAoperated Cormorant East, taking its stake there to 16%.
It will also pick up further shares in exploration licenses at the Kerloch and Typhoon prospects.
Antrim had been looking to sell its interest in Causeway after mounting costs and a shutdown at the North Cormorant platforms left it facing a likely breach of debt covenants.
It looked to have been given a lifeline after agreeing a deal to amend its payment and oil commodity swap agreement with Credit Suisse, but production on the field declined amid ongoing technical problems.
The move adds to First’s growth trajectory.
Its portfolio now runs to more than 30 exploration, development and production sites, mostly in the UK North Sea, including a 15% share in the massive Kraken field, which was given the go-ahead by Westminster in November.